Artificially created urban housing bubbles are very
popular with the wider public and politicians. The reason
for this is because for most people, bubble or fake wealth
is the closest they will ever get to creating significant
(in reality - "fake") wealth in their own lives.

The "fiction" of fake and bubble wealth
is further reinforced in the media - as commentators' and
economists inform the public that housing "inflation" is
"growth". Indeed economists have to date been more than
willing to explain to the public the "wealth effect" of
housing inflation.

But as the saying goes - "there is no
such thing as a free lunch".

All bubbles eventually burst
- which is what we are currently experiencing globally
within distressed and inflated urban housing markets -
creating massive economic, social and political
disruption.

The reason for getting the Annual Demographia
International Housing Affordability Surveys underway in 2004
( (http://www.demographia.com/dhi.pdf)
"2008 4th Edition") - was to illustrate in the clearest
terms possible - that urban housing markets should not
exceed three times gross annual household income - and that
if they do, there is likely some regulatory impediments to
the supply of new housing that needed to be dealt
with.

"Bubble bunnies" (from all walks of life) were more
than happy to scoff at the notion - that the important
relationship between household incomes and house prices was
a "fiction" - and that bubble pricing would continue
indefinitely.

But as explained within the recent
Planetizen Op Ed "The Housing Bubble: The Planner's (http://www.planetizen.com/node/34208)
Role and Lessons Learned" and "Getting performance urban (http://www.demographia.com/pav-performance.pdf)
planning in place" the focus must be on quickly getting
policies in place at local level - with the assistance of
State / National Governments - to allow affordable housing
to be built as soon as possible on the urban fringes.

The
fringes are the only inflation or supply vent of an urban
market. Local Government simply does not - or should not -
have the right to deny the construction of affordable
housing on the urban fringes.

In many distressed urban
markets - getting housing construction performance back to
internationally acceptable levels of affordability will take
many years. Generally "bubble markets" have severely
degraded the performance of their housing construction
industries as explained in "Scoop: (http://www.scoop.co.nz/stories/print.html?path=PO0804/S00406.htm)
Urban Planning Degrades Housing Productivity".

Indeed - in
a number of the distressed urban markets globally (United
Kingdom, California, New South Wales - Australia), in
employing the "build rate per thousand population" measure -
housing construction levels have likely already fallen below
those of the Great Depression - when adjusted for
population. (Refer "Scoop: (http://www.scoop.co.nz/stories/print.html?path=PO0808/S00303.htm)
Housing: The Disaster Zone Of California")

The collapse of
the housing bubbles globally will also bring to the fore,
the urgent need for "structural urban economics" training
within the economics, planning and property appraisal /
valuation professions globally as well.

It would appear
too - that many within the finance sector globally are in
urgent need of this training.

The only way to develop
"market sense" is by practical experience - something these
professions will not likely experience during their working
lives. So it will be important going forward for them to be
educated to better understand relevant measures and
indicators - so that in particular - they clearly understand
the difference between "real" (at or below three times gross
annual household income) and "fake" or "bubble" housing
value (above three times gross annual household income.
(Refer Scoop: Understanding (http://www.scoop.co.nz/stories/BU0808/S00149.htm)
Housing Bubbles and Scoop: (http://www.scoop.co.nz/stories/print.html?path=PO0808/S00311.htm)
Does The Economics Profession Understand At
All?)

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